Understanding Loan-to-Value (LTV) in Bitcoin-Backed Loans
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LTV is one of the most important terms in Bitcoin-collateralized lending. Here's what it means, why it matters, and how Volcano Bank helps clients manage it securely.
LTV, or Loan-to-Value, measures the ratio between the amount you borrow and the value of the Bitcoin you pledge as collateral. Example:
- Loan: $1,000,000
- Collateral: 20 BTC (worth $2,000,000)
- LTV = 50%
This means you're borrowing half the value of your Bitcoin.
Why it Matters
- Risk Management: A lower LTV = more security against volatility.
- Margin Calls: If Bitcoin price drops, your LTV rises, and you may be asked to add collateral.
- Liquidation Protection: Staying below thresholds helps avoid forced liquidation.
Volcano Bank's Approach
- At Volcano Bank, we set clear thresholds to protect both clients and the institution:
- Initial LTV: 50% (healthy zone)
- Margin Call: 70%
- Liquidation: 80%
- Clients always see their current LTV status in real time via the dashboard, with visual indicators (green, orange, red).
Pullout Box
Did you know? El Salvador's volcanic soils are among the most fertile in the world — a reminder that with the right conditions, growth thrives. LTV ratios are like those conditions: balance creates stability.
Want to learn more about managing collateral? Contact your Volcano Bank manager for a personalized consultation.
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